Human-New Economic Growth Engine

Nguyen Chi Dung, Deputy Minister of Planning and Investment, said in the context of rapid-changing world economies, most countries have policies to grasp opportunities and utilise their advantages, but Vietnam is still fuzzy on economic growth scenarios for the next 10 years. He frankly admitted that the possibility of being left behind is visible, not just predictable. Without the Government’s commitment to institutional reform and efforts of the Vietnamese business community, Vietnam’s GDP per capita may be lower than that of Myanmar, Laos or Cambodia.

 

Vietnam’s GDP growth slid from 7 percent a year in the 2000 -2005 period to 6.3 percent in the 2006-2010 period and only 5.62 percent in the 2011-2013 phase. In 2012, the country saw the lowest GDP growth in 15 years. In 2013 and the first three quarters of 2014, GDP growth was higher than in 2012 but was still low on weakened domestic demand, mostly caused by the world economic crisis. Besides, as the domestic economy is imbalanced and inefficient, the growth model is largely based on intensive capital and labour, investment efficiency is low, domestic enterprises are being restructured but the result is unsustainable, export is largely driven by foreign-invested companies, some industries are developing very rapidly but unstably like real estate and securities, budget deficit is ballooning, and bad debts skyrocketing.

 

Seeing existing economic weaknesses, the Government has launched drastic measures to revive the economy like speeding up State-owned enterprise (SOE) equitisation, revising the Law on Enterprises, reforming public investment by shifting from annual planning to medium-term and long-term planning and enhancing the accountability of investment decision makers. Besides, the Government has restructured the banking system in couple with settling bad debts and boosting credit growth. These consistent solutions have brought in positive results like macroeconomic stability, growth recovery, interest rate reduction, increased foreign exchange reserves and expected trade surplus of US$1.5 billion in 2014, and the recovery of real estate, construction and securities sectors.

 

However, according to Deputy Minister Dung, the above solutions are right but not enough. In the coming time, Vietnam needs fundamental changes to catch up with new development trends. More importantly, we must receive valuable opportunities from global integration. Thus, in the 2014-2020 period, Vietnam's economy must achieve the targets of maintaining macroeconomic stability, boosting economic growth and creating long-term sustainable economic momentum.

 

Speaking at the workshop, Professor Nguyen Mai said that if Vietnam wants to have good institutional reform and an open investment environment to attract more foreign investors, it must create real equality for private businesses and SOEs. However, he also stressed that Vietnam would rather focus on developing the domestic business community than rely on FDI enterprises.

 

Dr Doan Hong Quang, a specialist from the World Bank (WB), noted that Vietnam has a relatively good factor that can generate economic growth momentum but it has paid little attention to developing it. That is the labour force. He said that Vietnam is now carrying a five-time labour productivity gap between agriculture and industry. Therefore, policy-makers should have policies to move agricultural labour to the industrial sector. This will create major breakthroughs to Vietnam’s growth rate. In addition, the movement of labourers from the State sector to the private sector will promise high growth because the contribution of the private sector is increasing.

 

Dr Nguyen Van Thanh from the National Centre for Socioeconomic Information and Forecast (NCIF) highlighted two scenarios to forecast Vietnam’s economy in the next five years. According to the first scenario, the growth model will be shifted slowly while State management won’t be improved significantly. Vietnam will maintain a growth rate of 6.5 percent, inflation rate of 6.7 percent and investment capital to GDP of 13.14 percent. According to the second scenario, the growth model is restructured in the trend of industrialisation and modernisation, advantages of FTA are fully taken and State management obtains significant progress. The country will keep a growth rate of 7.1 percent, inflation rate of 7.21 percent and investment capital/GDP of 15.3 percent.

 

Remarking on expert opinions on economic scenarios, Deputy Minister Dung said that building the five-year economic plan is very important. But, to obtain these goals, Vietnam must focus on major solutions like accelerating economic restructuring, changing growth model, and enhancing economic quality, performance and competitiveness to promote sustainable economic growth, develop market economic institutions, restructure production and services sectors to meet growth demands, quicken corporate restructuring, and strengthen product competitiveness on international markets. More importantly, in addition to institutional reform, Vietnam also needs to pay special attention to human resources, one of important leveraging economic drives in the coming time.